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View Diary: President Obama leaves door open for smaller fiscal cliff package (95 comments)

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  •  Mostly no (6+ / 0-)

    It is true that extending unemployment and getting some infrastructure spending would be the upside, and chained CPI the downside, of Obama's last offer compared to going over the fiscal slope.

    But there are several errors in your comment. First, chained CPI is in no way justified to make up for the payroll tax cut of 2011-12. The fact is, since the Reagan-O'Neill deal of 1983, payroll tax receipts have exceeded what was needed to pay benefits in virtually every year. The excess was put into Treasury bills; that is, lent to the general federal budget to help plug the deficit.

    In 2010, when Obama cut his bad deal on extending the Bush rates for all, he was desparate for some kind of stimulus. He got the payroll tax cut, which put some more cash in the hands of strapped working people. By spending that extra cash, they made up for some of the gap in consumer demand that we've had since the 2007-08 crash.

    It's true that (deficit) funds from the general budget were shifted to offset the lost revenue from the payroll tax cut. But at no point did anyone say, hey, we're cutting payroll taxes so we'll have to cut Social Security benefits to compensate for it, rather than tax the 1% to pay for it. That would have prompted outrage and that is NOT what they did.

    Frankly, higher-than-necessary payroll taxes from 1983 to 2010 helped mask the revenue shortfall from Reagan's (and W's) tax cuts for the wealthy. The least the general fund can do is cover two years' worth of payroll tax cuts without cutting Soc. Sec. benefits.  The trust fund, for nearly 30 years, was "bank" to the General Fund.

    Also, chained CPI is in no way tied to the deficit. Other than the (deficit) spending to offset the payroll tax cut, Social Security as a program has contributed nothing to the deficit. Social Security is a free-standing program funded by the payroll tax, which in most years has been more than sufficient, and by interest legitimately due on the money Social Security lent to the general budget.

    The idea that benefit cuts, forever and ever, are justified because we had a brief payroll tax cut after nearly 30 years of the payroll tax being too high, is erroneous. I don't ascribe any bad motives to you, I know you're trying to grasp the details, but it's also dangerous. It promotes the fallacy that Social Security drives the deficit.

    It does not. Even Ronald Reagan agreed emphatically Social Security does not drive the General Fund deficit.
    We have long had a Social Security surplus and a general budget deficit, because we want the federal government to do certain things but the GOP has been unwilling to tax the rich more to pay for it. Because they could have cut the payroll tax without adding deficit spending two years ago if they had raised an equal amount by increased taxes on the wealthiest.

    The only reason chained CPI has been raised in a "deficit" deal is because Boehner & Co. want to extract something for their ideological agenda in exchange for, I suppose, signing off on unemployment extension and the infrastructure money.

    On balance I oppose the Obama proposal because it says, hey, let's cut benefits for old people on fixed incomes and the disabled in this sneaky wonky way, instead of restoring pre-Bush tax rates (already historically low) on taxable income (after all deductions) of $250K to $400K.

    But I mainly oppose it because it promotes the lie that Social Security bears any responsbility at all for federal deficits. Not so. That sets a nefarious precedent and I have not been encouraged by Obama's repeated offers over the years to "reform" Social Security. Any reform to deal with real shortfalls that will come in 25 years can be handled closer to that time by adjustments in the payroll tax.

    Republicans...think the American standard of living is a fine thing--so long as it doesn't spread to all the people. And they admire the Government of the United States so much that they would like to buy it. Harry S. Truman

    by fenway49 on Fri Dec 21, 2012 at 05:35:23 PM PST

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    •  I'd also add (5+ / 0-)

      that with the economy still weak we really need more stimulus, not more deficit reduction. This actually is a perfect time for deficit spending. We have weak consumer demand and incredibly low borrowing rates.

      That's the funny part of the "fiscal cliff" hysteria. Most of the mainstream media seems to be eliding the part where the problem, if we do nothing, is too much deficit reduction too soon. Not too little.

      Long term we have a deficit/debt problem. Short term we have a weak demand, not enough jobs problem. Solving the jobs problem would help solve the deficit problem. More people working in decent-paying jobs means more taxpayers, fewer folks stuck on unemployment and food stamps, which do cost the government. Win-win.

      The current focus on closing the deficit centers on equal parts spending cuts and revenue increases. The truth is, except for defense, we've already cut spending to the bone. Obama even brags that federal discretionary spending is as low a share of GDP since Eisenhower (like that's a good thing). We have less a "deficit" problem than a revenue problem. As in people who used to pay a marginal tax rate over 70% now paying 35%, and 15% on capital gains and dividends.

      Obama's big mistake, from which all of this flows, is not pushing for sufficient stimulus when he took office. People said it couldn't pass, but he was new and had all the momentum. Propose a sufficient stimulus, even if the number is huge ($1.8 trillion or so). If the GOP filibusters, the markets will flip out and they would have caved.

      Failing to do it kept unemployment high with real human costs. It also made Dems who claimed it worked (though it did, as far as it went) look out of touch. It (and demagoguery on Obamacare/Medicare) gave us this Tea Party House and gerrymandered House districts. People say the Dem base was unmotivated in 2010 and independents turned on Obama. Think that would have happened if he inherited a crisis and got unemployment down to 6.5% in two years?

      Republicans...think the American standard of living is a fine thing--so long as it doesn't spread to all the people. And they admire the Government of the United States so much that they would like to buy it. Harry S. Truman

      by fenway49 on Fri Dec 21, 2012 at 06:05:11 PM PST

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      •  fenway, we are in agreement on all ideological (2+ / 0-)
        Recommended by:
        tardis10, kj in missouri

        issues and the substantive fiscal ones as well.

        I understand that SS is self funded and rather than driving deficits it actually has been used as a bank of sorts without most of the nation knowing there are IOUs to the SS fund.

        What I wanted to be sure of is that some in the bubble wonk didn't make up some language when the FICA cut was put in place (small stimulus) to use the General Fund to refund the difference in what would have been collected. That is what I am beginning to understand is the argument. I think.

        And added to that is the concept that if payments are reduced, then the amount needed to be repaid would be less.

        I get that this is over the backs of old and disabled people. I am in both categories and care a lot. It is wrong.

        I just want to understand the argument that is being made.

        Thank you so much.

        Science is hell bent on consensus. Dr. Michael Crichton said “Let’s be clear: The work of science has nothing to do with consensus... which is the business of politics. Science, on the contrary, requires only one investigator who happens to be right,”

        by Regina in a Sears Kit House on Fri Dec 21, 2012 at 08:20:11 PM PST

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        •  The chained cpi will (2+ / 0-)
          Recommended by:
          kj in missouri, fenway49

          increase taxes and so increase revenue into the general fund.
          http://www.dailykos.com/...

          "George RR Martin is not your bitch" ~~ Neil Gaiman

          by tardis10 on Fri Dec 21, 2012 at 09:27:06 PM PST

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        •  No (1+ / 0-)
          Recommended by:
          kj in missouri

          I could have made a shorter reply. Sorry! But no. With all the Bush tax cuts up, there would have been hell to pay for a deal that said, "You want stimulus? Fine. Cut the payroll tax AND cut social security benefits to offset the cut. In exchange, GOP demands you leave the tax rates on top earners unchanged."

          That was not the deal. The dollar amount of the FICA cut and the chained CPI, which goes on indefintely, don't match up. The "argument" being made is just the simple but false one I wasted your time disproving (though hopefully someone else will benefit): we have a huge deficit, so we need cuts somewhere. The realpolitik is that it's a cost of getting Boehner to a deal, which he maybe can't do anyway. But there's no justification even offered that maps on to anything as neatly as you were suggesting.

          Republicans...think the American standard of living is a fine thing--so long as it doesn't spread to all the people. And they admire the Government of the United States so much that they would like to buy it. Harry S. Truman

          by fenway49 on Sat Dec 22, 2012 at 07:30:14 AM PST

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        •  This did happen (1+ / 0-)
          Recommended by:
          kj in missouri
          What I wanted to be sure of is that some in the bubble wonk didn't make up some language when the FICA cut was put in place (small stimulus) to use the General Fund to refund the difference in what would have been collected. That is what I am beginning to understand is the argument. I think.
          The General Fund did refund what would have been collected. That part's true. And that was deficit spending by the General Fund. But nobody's arguing, even now, that S.S. drives deficits because of that.

          The clear answer is, you could have left FICA intact in 2010 and cut income tax on the first X of income. Same result for the General Fund (some more deficit spending).

          If you're a conspiracy theorist you might say they did cut a private deal to reduce benefits to offset the FICA cut, but delayed implemenation of chained CPI. I don't really think that happened. But, anyway, no such deal was made public for a reason: it's unacceptable. Even Congressional Dems in 2010 would  have blocked that. So we can't let them do it through the back door now.  

          Republicans...think the American standard of living is a fine thing--so long as it doesn't spread to all the people. And they admire the Government of the United States so much that they would like to buy it. Harry S. Truman

          by fenway49 on Sat Dec 22, 2012 at 07:37:19 AM PST

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    •  Thank you. /nt (2+ / 0-)

      "From single strands of light we build our webs." ~kj

      by kj in missouri on Fri Dec 21, 2012 at 07:50:52 PM PST

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